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College Financing Seminar

Presented by:

The Massachusetts Association of Student Financial Aid Administrators (MASFAA)

MASFAA 2

Agenda Early College

Planning Financial Aid

Overview Your Financing

Options Where to Get More

Information

Loans Greater Factor In Financing College

58%

41%47%

0%

20%

40%

60%

80%

80-81 92-93 98-99

Financial Aid For Families Has Grown Increasingly Aid Means Loans

Loans as a % of Financial Aid

Source: The College Board, 1999 Trends in Student Aid

MASFAA

Benefits of Saving ALL educational options left open, regardless

of cost Reduces or eliminates the need to borrow Spreading out the cost of college over time,

minimizes the impact on your lifestyle during the years you pay for college

Minimum impact to financial aid Need Analysis Family contribution from parents’ assets = 6% Family contribution from student’s assets = 35%

MASFAA

Why Save? An example of the positive effect of saving

versus borrowing To accumulate $10,000 in 10 years at 7%

interest Save $79 per month

To repay $10,000 over 10 years at 7% Pay $116 per month

The real cost of borrowing rather than saving $116 - $79 = $37 x 12 months x 10 years = $4,440

Massachusetts Association of Student Financial Aid Administrators

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Overview Total Aid Awarded ($68.4)

6%4%3%

5%

11%

20%

51%

Federal Loans- 51%Non-Federal Loans-6%Other Federal Programs- 4%Federal Campus-Based- 3%State Grant Programs- 5%Federal Pell Grants- 11%Institutional & Other Grants- 20%

Over $68 Billion given out in Financial Aid in 1999-00*

Parents in the same circumstances should be able to afford the same amount for college; those in different circumstances, different amounts

Parents & Students have the primary responsibility for financing college cost

*The College Board

What is Financial Aid? Grants, Scholarships

Free Gifts Do not have to be repaid

Loans Money that must be

repaid Borrowed by student,

parent, or both

Work Study Money student is given

the opportunity to earn

$$

IOU

Vocabulary

COA = Cost of Attendance - Includes tuition, room, board, fees, books, supplies, transportation, personal expenses

EFC = Expected family contribution - Measure of what a family is expected to contribute over a year

Financial Need (Eligibility) = Difference between COA and EFC

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Resources for Estimating Your

Expected Family Contribution (EFC)

• Federal EFC Handbook Federal EFC Handbook 1(800)4FED-AID1(800)4FED-AID

• On the WebOn the Web

•http://www.finaid.orghttp://www.finaid.org

•http://collegeboard.comhttp://collegeboard.com

‘Financially’ Manageable During and AFTER

the College years

PARENTPARENT STUDENTSTUDENT

Will not jeopardize Financial Security Comfortable

Retirement Educating other

children other financial goals

Will not leave excessive debt

Will not jeopardize financial independence after graduation

Estimate the ‘Total’

Cost of Education4+ years of expenses

Estimate the ‘Total’

Cost of Education4+ years of expenses

Look at your entireFinancial Situation

Look at your entireFinancial Situation

Make financial decisions that :

Parent savings Transfer of income producing assets to a child

under the Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA)

Series EE and Series I US Savings Bonds Education IRA Traditional IRA Roth IRA Qualified Savings Tuition Plans

Strategies for Financing Higher Education

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Ownership of Investment

Parent versus Student Time Factor

Tax Exemption

Risk

Individual Stocks

Zero Coupon Bonds

TreasuryBills

Mutual Funds

Savings Bonds

Investment OptionsInvestment Options CD’s

U. PlanPrepaid Tuition Program

Investment ConsiderationsInvestment Considerations

Money Markets

Municipal Bonds

U. FundCollege Investing Plan

College Savings and Investment Options

Education IRA

Traditional & Roth IRA’s

U.Fund College Investing Plan Tax-advantaged investing

opportunity Use at any college for all

qualified educational expenses

College Savings Plans Options in Massachusetts

Using the U.Fund

Use for qualified educational expenses (tuition, room, board, fees, books, and supplies)

Use anywhere in the United States Accredited post-secondary

institution Public and private Two-year community college Vocational technical schools

Undergraduate and Graduate Education

U.Plan Prepaid Tuition Program

Lock in tomorrow’s tuition at today’s rates

82 Participating Colleges and Universities

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Financial Planning Recommendations

Estimate your total costs for all 4 years of college

Parents and Student together should develop a plan to fund and finance=> know what you’re signing up for=> know how you will pay for it

If you need to borrow:=> understand your options educational loans, personal loans, home equity loan => know the terms

Apply to at least one financially ‘safe’ school

It’s Never Too Early or Too Late to Start Saving

Determine how much you’ll need Don’t be discouraged..financial aid could be

available

Determine how much you can afford to save No amount is too small On a regular basis (weekly, monthly)

Select appropriate investment vehicles Evaluate your financial situation annually

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How Parents Can Help Encourage student to keep options

open Facilitate decision-making and

access to appropriate courses Make students aware of all the

opportunities available and the academic requirements involved

Be aware of opportunities for financial aid and the benefits of early financial planning

Visit a public and private college campusand look around

Thanks For Your Attention!

Questions…